 "Disney's hot streak stalls, prompting rumours that it's looking to grow")
This is new territory for Robert A Iger.
Since taking over as chief executive of the Walt Disney Company in October 2005, Iger has been on a near-constant roll. First came the triumphant purchase and integration of Pixar. He did it again with Marvel Entertainment. And then again with Lucasfilm. Disney's theme parks were barely grazed by the Great Recession because of his decision to spend aggressively on upgrades.
As annual profit climbed from $3.4 billion in 2006 to an astounding $8.4 billion last year, Disney's share price shot up accordingly, from about $31 in 2006 to $122 in August 2015. But those high-flying days are starting to seem like a distant memory, at least on "what have you done for me lately" Wall Street.
Over the last year, Disney has been unable to convince investors that ESPN, its long-time growth engine, will keep chugging away - albeit at a slower rate - even as it deals with the subscriber erosion that is buffeting the broader cable TV business. Shares have dipped to about $93 (making Disney one of the worst-performing Dow Jones industrial average stocks this year), even as it flawlessly opened the $5.5 billion Shanghai Disney Resort and delivered four movies with roughly $1 billion in global ticket sales (no other studio has even one).
"It's been an incredibly frustrating stock," said Jessica Reif Cohen, an analyst at Bank of America Merrill Lynch.
So, where does this leave Iger? Awash in acquisition rumours.
One week, he is supposedly planning to jump-start growth by bolting on Vice Media, the "gonzo journalism" and entertainment company. (Disney already owns an 18 per cent equity stake in Vice.) The next week, the rumour mill contends that Iger is interested in Spotify, the internet music service. Don't leave Netflix out of the speculation mix, despite its $42 billion market cap.
Last week, Disney's acquisition du jour was Twitter, the growth-starved social media network that has been viewed as a potential takeover target for Google, Salesforce or Microsoft. As first reported by Bloomberg, Disney hired a financial adviser to evaluate a possible bid for Twitter. That is a long way from actually making a bid, but the news still prompted a frenzy of conjecture. Disney and Twitter declined to comment.
Twitter might be a smart way for Disney to shore up ESPN's relationship with sports fans, some analysts theorised. As Barclays Capital's media team said in a research note on Tuesday, sporting events make up 1.4 per cent of TV programming on average but account for almost half of all Twitter conversations about TV. Moreover, Twitter has been moving into live-streaming sports and news - using streaming technology supplied by BamTech, which counts Disney as a major stakeholder.
"Given Iger's interest in technology, Twitter's in-process repositioning as a mobile live video destination and Disney's need to shift its story away from the challenges facing ESPN, a Twitter acquisition has real strategic merits," Rich Greenfield, an analyst at the financial services firm BTIG, wrote in a blog post. Greenfield noted that Jack Dorsey, Twitter's chief executive and co-founder, also sits on the Disney board: "We believe Dorsey wants to sell to a media company to power their over-the-top, mobile-video ambitions."
Adding to the acquisition speculation is Iger's track record of going shopping about every three years - he's overdue by that measure - and his history of bold moves, Reif Cohen said.
The problem: Unlike the reactions to deals with Pixar, Marvel or Lucasfilm - companies that were instantly lauded as perfect targets for Disney - any cheerleading for a Disney-Twitter tie-up was drowned out by sharply negative responses. "To buy Twitter would be the equivalent of throwing money out the door," said Michael Nathanson, an analyst at MoffettNathanson. "There's no penalty for taking a look, but I'd be shocked if Disney actually buys it."
Nathanson pointed out that Disney had challenges aside from ESPN. Iger plans to retire in a year and nine months, and there is no public succession plan; Thomas O Staggs was ejected in April.
ABC, Disney's broadcast network, needs new hits. And its consumer products unit has been coming down from a "Frozen"-fuelled high.
Yet Disney also remains stronger than most of its competitors, he noted. It has toy-friendly movies on the way that are expected to be mega-hits, including "Doctor Strange," "Rogue One: A Star Wars Story" and a live-action "Beauty and the Beast." Wall Street may also be overlooking value from the Marvel and Lucasfilm acquisitions that is still waiting to be unlocked: There are "Star Wars" attractions coming to Disney's theme parks in California and Florida, for example.
"Disney needs to buy nothing," Nathanson said. "I don't think Disney is incomplete at all."
Iger, who declined to comment for this article, does seem to have an itch to buy something. But there are no clear moves. (Lego, long on Disney's wish list, is too expensive; the often-on-the-edge Vice brings potential image problems.) And, as the Twitter reaction shows, there are no obvious technology moves.
Uncharted territory for Iger and the company he has steered to overwhelming success.
©2016 The New York Times News Service
